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ACCT - Unit 2
Basic Accounting Cycle - Service Business
| Term | Definition |
|---|---|
| Account | a record summarizing all the information pertaining to a single item in the accounting equation |
| Account balance | the amount in an account |
| Account number | the number assigned to an account |
| Account title | the name given to an account |
| Accounting cycle | the series of accounting activities included in recording financial information for a fiscal period |
| Accounting equation | an equation showing the relationship among assets, liabilities, and owner's equity |
| Accounting period cycle concept | changes in financial information are reported for a specific period of time in the form of financial statements |
| Accounting record | an organized summary of a business's financial activities |
| Accounting system | a planned process for providing financial information that will be useful to management |
| Adequate disclosure concept | financial statements that contain all information necessary to understand a business's financial condition |
| Adjusting entries | journal entries recorded to update general ledger accounts at the end of a fiscal period |
| Adjustments | changes recorded on a work sheet to update general ledgers accounts at the end of the fiscal period |
| Assets | anything of value that is owned |
| Balance sheet | a financial statement that reports assets, liabilities, and owner's equity on a specific date |
| Business entity concept | financial information is recorded and reported separately from the owner's personal financial information |
| Capital | the account used to summarize the owner's equity in a business |
| Chart of accounts | a list of accounts used by a business |
| Closing entries | journal entries used to prepare temporary accounts for a new fiscal period |
| Consistent reporting concept | the same accounting procedures are followed in the same way in each accounting period |
| Correcting entry | a journal entry made to correct an error in a ledger |
| Credit | an entry to the right side of a T account |
| Debit | an amount entered on the left side of a T account |
| Equities | financial rights to the assets of a business |
| File maintenance | the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current |
| Fiscal period | the length of time for which a business summarizes and reports financial information |
| General ledger | a ledger that contains all accounts needed to prepare financial statements |
| Going concern concept | financial statements are prepared with the expectation that a business will remain in operation indefinitely |
| Income statement | a financial statement showing the revenue and total expenses for a fiscal period |
| Ledger | a group of accounts |
| Liability | an amount owned by a business |
| Matching expenses with revenue concept | revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period |
| Net income | the difference between total revenue and total expenses when total revenue is greater |
| Net loss | the difference between total revenue and total expenses when total expenses are greater |
| Objective evidence concept | a source document is prepared for each transaction in a business |
| Opening an account | writing the account title and number on the heading of an account |
| Owner's equity | the amount remaining after the value of all liabilities is subtracted from the value of all assets |
| Permanent accounts | accounts used to accumulate information from one fiscal period to the next |
| Post-closing trial balance | a trial balance prepared after the closing entries are posted |
| Posting | transferring information from a journal entry to a ledger account |
| Proprietorship | a business owned by one person |
| Temporary accounts | accounts used to accumulate information until it is transferred to the owner's capital account |
| Transaction | a business activity that changes assets, liabilities, or owner's equity |
| Trial balance | a proof of the equality of debits and credits in a general ledger |
| Work sheet | a columnar accounting form used to summarize the general ledger information needed to prepare financial statements |
Created by:
candace.freeman
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